Supreme Court New South Wales

• Medium Neutral Citation: Metropolitan Petar v Mitreski [2012] NSWSC 1610
• Hearing dates: 30 April 2012
• Decision date: 21 December 2012
• Jurisdiction: Equity Division
• Before: Brereton J

Decision

See orders

• Catchwords: TRUSTS AND TRUSTEES - Charitable trusts - accessorial liability - where Association was an integral element of Macedonian Orthodox Church under Church law - where office-bearers knew this but did not know that Association held its property on charitable trust and instigated actions in accordance with Association's constitution but in breach of terms of charitable trust - whether given knowledge of relationship of Association with Church, including that office-holders customarily swore oaths to uphold church law, it transgressed ordinary standards of honest behaviour for them to procure the appointment of and remunerate a priest without the Bishop's authority - held, it did.; COSTS - where dispute concerned genuinely held views of opposing factions in relation to the conduct of a religious association - where proceedings highly contentious - whether proceedings analogous to public interest proceedings - held, they were not - relevance of effect on trust property of making or not making a costs order - whether just that a party who successfully brings proceedings to enforce a charitable trust should be left unindemnified by unsuccessful defendants - costs of unprosecuted cross-claim - whether rendered inutile by subsequent events - costs of interlocutory proceedings brought in aid of rights under interlocutory regime, which rights were ultimately vindicated.
• Legislation Cited: (NSW) Trustee Act 1925, s 85
• Cases Cited: Adler v ASIC [2003] NSWCA 131; (2003) 46 ACSR 504; Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473; Metropolitan Petar v Mitreski [2012] NSWSC 16; Metropolitan Petar v Mitreski [2012] NSWSC 167; Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661
• Category: Consequential orders
• 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 This judgment deals with two issues which remain outstanding from the judgment delivered on 3 February 2012 [Metropolitan Petar v Mitreski [2012] NSWSC 16] ("the principal judgment"), and the consequential orders made on 5 March 2012 [Metropolitan Petar v Mitreski [2012] NSWSC 167] ("the orders judgment"), namely the alleged accessorial liability of the first, second, third, fourth and fifth defendants, ("the Committee Members"), and the question of costs.

Accessorial Liability

2 The principal judgment addressed the principles relevant to accessorial liability in this context (at [158]-[165]), concluding that a person other than the trustee could be held liable for breach of trust on the footing of knowingly inducing or procuring a breach of trust (at [164]), that liability on this footing involved an element of knowledge (at [164]), and that this in turn required "consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour" (at [165]). I then concluded that the Committee Members had transgressed those standards (at [166]):

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.

3 On that basis, I proceeded to hold each of the Committee Members liable as an accessory to account to the trust for the emoluments paid to Father Dzeparovski and Father Despotoski while that Committee Member remained in office, except payments made prior to November 1997 in respect of which the claim was statute barred (at [168]).

4 Thus it will be observed that I relied on Mr Eftimov's evidence to establish that all the Committee Members had sworn an oath of office upon election to the Committee, and concluded that repudiation of that oath was of itself dishonest in the relevant sense (for reasons earlier explained at [150]). However, by the time of the orders judgment, it had occurred to me that my reliance on Mr Eftimov's evidence for the purpose for which I had used it might have been misplaced, as that evidence related to an earlier election than that of 14 April 1997 (when the first to fifth defendants were elected to the Committee), which triggered the events that led to the dispute the subject of these proceedings. Accordingly, I did not make any order to give effect to the conclusion expressed in the principal judgment in respect of accessorial liability, but observed (at [26]) in the orders judgment that it would be necessary to make directions for written submissions, inter alia, "on further consideration of the accessorial liability of the Committee Members".

5 Such directions were made, in respect of which I added:

So far as written submissions on accessorial liability is concerned, it is not intended that they should revisit the legal principles discussed in the principal judgment. So far as the defendants are concerned, it is open to them to submit that at least in respect of three of the Committee Members, the evidence might not establish that they had given oaths of office and so far as the plaintiffs are concerned, it is open to them to submit that the inculpatory findings should be supported on other grounds.

6 Each of the parties has subsequently made written submissions on the question, which are unsurprisingly far more comprehensive than the original submissions on this issue.

7 Before addressing them, it is appropriate to recall the manner in which the issue in respect of accessorial liability was defined during the trial when, on the thirteenth day, senior counsel for the defendants stated, prior to the cross examination of the third defendant Mr Minovski (at T597.25):

I wish to know squarely what, if at all, the dishonest conduct [alleged against the Committee Members] is to be.

8 There ensued the following exchange:

HIS HONOUR: I understand there to be no allegation in this case that these gentlemen [the first to fifth defendants] pocketed moneys for their own benefit. The complaint is that they paid it to Father Despotoski and the other priest whose name begins with D, and not to the diocese. That is as I understand as a matter of fact what it boils down to.

LEEMING: Then perhaps it is just a debate about words like dishonesty which have connotations.

HIS HONOUR: I think the debate is that with knowledge of church law it equates to dishonesty.

LEEMING: If that is what is being put and that is the extent of what is being put I understand that and I can deal with that. I understand that from the written submissions.

PARKER: Certainly with regard to Mr Minovski, all that is put in relation to him is that he did what he did and that that had the effect of procuring a breach of trust and he did so with knowledge, or recklessly as to whether there was a breach. If one wants to pin the label of dishonesty on that, well, if the label fits so be it.

There is no allegation that he personally profited and, so far as he is concerned, I think there is really nothing more to say. Others, I must say, have the additional factor that they did swear an oath to do something and if one regards acting contrary to a sworn oath as another badge of dishonesty, that will be something we will be relying on as well. But he did not swear an oath because he wasn't one of the people who swore the oaths in October of 96.

9 While I accept that the plaintiffs may seek to establish accessorial liability on a different basis from that which I adopted in the principal judgment (as, having reached that conclusion, I did not consider other bases on which it might be supported), any such basis must be within the scope defined by the above discussion. To go outside its scope at this stage would be unfair to the relevant defendants.

10 The evidence establishes that the first defendant Mr Mitreski, the second defendant Mr Damcevski and the fourth defendant Mr Eftimov took oaths on 7 October 1996, which they signed in writing, in the following form (translated from the Macedonian original):

I do swear by the Almighty Our Lord, before the Authorised Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand and the Macedonian people that: I will be devoted and veridical to our Mother Macedonian Orthodox Church and I will honour the Holy Canons of the Orthodox Church, the Constitution of the Macedonian Orthodox Church, the Statute of the Macedonian Orthodox Diocese of Australia and New Zealand, the By-Law of the Macedonian Orthodox Church Community "St Petka" Rockdale as well as all other legal policies and regulations of the Church.

11 Consistent with my previous findings in this respect (see principal judgment at [148]), I accept the evidence of Father Mitrev, which in this respect was unchallenged and was corroborated by that of Mr Eftimov, that the oath was also administered and taken orally, and reject Mr Mitreski's evidence to the contrary.

12 It is common ground that there is no evidence that Mr Minovksi - who was not one of those elected on 7 October 1996 - took an oath, on that or any other occasion. Nor was the fifth defendant Mr Marcevski one of those elected on 7 October 1996, and he did not take an oath on that occasion.

13 The defendants submit, however, that to the extent they took such oaths, they were not in respect of the office and the period of office on which they embarked on 14 April 1997, and thus were not binding on their conscience in respect of that office and period of office. Although the plaintiffs submitted that this argument was outside the scope of the directions of 5 March 2012, I do not agree; I accept that the relevant conclusion in the principal judgment was one that proceeded on the basis that the defendants' consciences were bound by an oath operative following 14 March 1997.

14 The plaintiffs further submitted that it was immaterial whether the oaths were given in respect of the office and period of office that commenced on 14 April 1997, and that the oaths given earlier were not spent by or from 14 April 2007. It is true that the oaths in their terms are not expressed as to operate only for a limited period or only in respect of the office to which they were elected at the time. The notion of a person elected or appointed to an office taking an oath in respect of that office (and repeatedly doing so in the case of re-election or re-appointment) is not by any means uncommon, and although its terms are not so limited I accept that the oath is properly to be regarded as binding on the conscience of the person who takes it only in respect of the office and period of office in respect of which it is given. As none of the Committee Members gave an oath in respect of their periods of office commencing on 14 April 1997, it follows that dishonesty is not established merely by repudiation of that oath following 14 April 1997, and insofar as the conclusion in the principal judgment relied on the contrary view it cannot be supported.

15 However, although that was undoubtedly part of the basis for the conclusion in the principal judgment, it was not the whole basis. Nor is the significance of the earlier oaths limited to whether they "bind the conscience" of the relevant defendant such that departure is thereby dishonest. They have wider relevance, as they establish, on the part of each Committee Member who had in the past taken such an oath, knowledge that officers of the Association were conventionally bound and expected not only to act in accordance with the Association's constitution, but also - to paraphrase the oath - to be loyal to the Macedonian Orthodox Church and its Holy Canons and Constitution, the Statute of the Macedonian Orthodox Diocese of Australia and New Zealand, the By-Law of the Macedonian Orthodox Church Community "St Petka" Rockdale, and all other legal policies and regulations of the Church - in other words, to comply with Church law. As was held in the principal judgment, a fundamental aspect of this is that it is the Bishop who administers the sacraments, albeit through the medium of the parish priest as his agent, and that a priest not appointed by the Bishop is from a religious perspective a nullity. Those Committee Members who had taken an oath - at any time and in respect of any office in the Association - must have known that regardless of the provisions of the Association's constitution, the Association was not a "free-standing" community association but one which was also an integral part of the Macedonian Orthodox Church, and the substratum of which included an assumption that it would be governed by Church law as well as by its secular Constitution. As observed in the principal judgment (at [150]), there is significance in Mr Mitreski's false denial that any such oath was administered orally, and in Mr Eftimov's insistence that it was not sworn in the church - the former reflecting conscious or unconscious appreciation of the difficulty of reconciling the oath with his subsequent conduct, and the latter being an attempt to minimise the significance of the oath for the same reason. The second defendant Mr Damcevski did not give evidence and I infer that he could have said nothing exculpatory on this issue.

16 Mr Marcevski had been a Committee Member of the unincorporated association at various times between 1977 and 1992. Article 25 of the By-Laws required that following election, members of the committee take an oath before the parish priest. That this requirement was followed in practice emerges from an oath subscribed by officers of the Association on 4 February 1994, which recited (emphasis added):

On the bases of article 23 of the Constitution of the Macedonian Orthodox Church and the previously established practice in the workings of the MOCC "Saint Petka" in Rockdale, New South Wales, Australia, the Executive Committee of the same Church Community, on the 4th of February 1994, before their parish priest Reverend Lupco Dvojakovski, articulated and with their own hand signed the following:

OATH

I, (FIRST AND LAST NAME OF THE MEMBER), SWEAR BY THE All-powerful God, that to my Mother, the Macedonian Orthodox Church, I would be faithful and surrendered in all, that conscientiously, responsibility and as a role model, will conduct myself by the Holy Canons, the Constitution of MIOC and the Bylaw of the Church Community "Saint Petka" in Rockdale, Sydney, NSW, as also by the other Church rules and regulations. I will fulfil my duty consciously, morally, responsibly and with honesty will guard the formal secrets of the Church and the interests of the same, I will defend and advocate.

As I do this, in the same way may God help me in this life and the next.

Signed with the own hand of those taking the Church oath:

17 Although Mr Marcevski professed not to recall it (his initial "I don't remember" [taking an oath] evolved into "I haven't taken any oath"), I infer that Mr Marcevski did take an oath in substantially the same terms as that set out above on at least one if not more occasions when he was appointed or elected to the committee of the unincorporated association, and his denial of recollection of it has a similar effect to my above observations in connection with Mr Mitreski and Mr Eftimov. His prior involvement in governance of the Association's unincorporated predecessor imports knowledge on his part, equivalent to that of Mr Mitreski, Mr Damvecski and Mr Eftimov, that the Association was governed by Church law as well as by its Constitution.

18 Mr Minovski's position is somewhat different. As I have mentioned, Mr Minovksi had not sworn any such oath and was not shown to have notice of its contents. Moreover, unlike Mr Marcevski, it did not appear that he had ever previously held a governance role in the Association or its unincorporated predecessor. While his longstanding involvement in the Association and its predecessor as a member might support an inference that he must have known that the Association was not "free-standing" but integrated into the Church, in the absence of something analogous to the oaths taken by the other Committee Members, or prior involvement in its governance (as distinct from mere membership), I am unable to be convinced that he knew that the Association was governed by Church law as well as by its Constitution. This conclusion is fortified by his apparently very rudimentary understanding of the existence of Church law, let alone of its provisions. While he admittedly knew that the church had its own rules including the Holy Canons, Constitution and Diocesan Statute, it was not established that his knowledge was more than marginal, and in particular it was not established in his case - as it was in the case of the others, by the oaths - that he had knowledge that the substratum of the Association included obligations to Church law overlaid on the Association's constitution. While his answer to the question whether he knew that the members of the Association were not entitled as a matter of church law to remove or replace the priest (referred to at [144] of the principal judgment) might seem somewhat evasive, examination of his cross-examination as a whole shows that many of his answers suffered from the same difficulty of being less than directly responsive, which might well be attributable to linguistic difficulties rather than to evasion.

19 To establish accessorial liability - in any field - it is not necessary that the alleged accessory know that the principal is contravening a relevant law; it is sufficient that the alleged accessory knows the essential elements of the principal's conduct, that constitute the relevant contravention. In other words, while the accessory must have knowledge of all the elements of the principal's conduct that together constitute the contravention, the accessory need not know that in law those elements amount to a contravention [Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473; Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661, 668-70; Adler v ASIC [2003] NSWCA 131; (2003) 46 ACSR 504, [330] - [342]]. Consistent with that approach, in the present context, it is not necessary that to be liable as an accessory, the defendants must have known that in engaging and remunerating Father Dzeparovski and Father Despotoski the Association was committing a breach of trust; it is sufficient that they know those elements of the transaction that make it transgress ordinary standards of honest behaviour.

20 For that reason, the elaborate and at first sight persuasive submissions advanced by the defendants - to the effect that, from the acceptance in the primary judgment (at [148]) that the Committee Members 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, it follows that the first to fifth defendants had no apprehension that any of the Association's property was not property with which the Association could freely deal, and could not be taken to have known or to be reckless as to whether there was attached to that property an obligation to obey each and every edict of the Bishop - are not correct. While they may have believed that the property of the Association was not trust property, they (other than Mr Minovski) knew that the substratum of the Association, and its governance, had associated obligations to uphold church law. In particular they understood that the Bishop's approval was essential for the effective appointment of a priest. An additional reason for this is that the supposed distinction between what happens inside the church (in respect of which all the Committee Members accepted that the priest was the relevant authority) as distinct from the affairs of the community association becomes entirely artificial when it comes to the employment of the very parish priest who is to administer the sacraments in the church.

21 Accordingly, while I have accepted that the Committee Members honestly and not unreasonably believed that the Association was beneficially entitled to its property and did not hold it on trust, they (other than Mr Minovski) also knew that it was implicit in their accepting a role in the governance of the Association that they would observe church law, and in particular that the priest could be appointed and removed only by the Bishop, and that a priest who had not been duly appointed by the Bishop could not validly administer the sacraments and from the church's perspective achieved nothing. In those circumstances, for them - having excluded the Bishop's priest - to remunerate priests not appointed by the Bishop, to no good religious end, transgressed the ordinary standards of honest behaviour.

22 Reduced to the core elements, the Committee Members (other than Mr Minovski) assumed office in the Association knowing that the Association was an integral part of the Macedonian Orthodox Church, and that its substratum included the law and doctrine of the church. They knew that according to the law and doctrine of the church, a parish priest could not be removed or replaced except by the Bishop, and that a priest not appointed by the Bishop achieved nothing. They knew that the Bishop did not approve or authorise the removal of Father Mitrev or the appointment of Father Dzeparovski or Father Despotoski. In that context, belief that their own Constitution authorised them to act as they did is insufficient to dispel the conclusion that, in procuring the Association to appoint and remunerate a priest not approved by the Bishop, to perform acts that were in the eye of the Church a religious nullity, they were transgressing ordinary standards of honest behaviour.

Costs

23 The plaintiffs contend that to dispose of all outstanding questions of costs in the proceedings orders should be made as follows:

(1) The plaintiffs' costs of the sixth defendant's cross claim filed 16 December 2004 against the plaintiffs, including all interlocutory applications relating to that cross claim, be paid by the sixth defendant;

(2) The plaintiffs' costs of:

(a) The plaintiffs' Notice of Motion filed 5 August 2003 and the proceedings resulting in orders by Young CJ in Eq on 27 August 2003 (relating to access to the church); and

(b) The sixth defendant's Notices of Motion filed 3 September 2003 and 16 October 2003 (relating to the reconsecration of the church), be paid by the sixth defendant.

(3) The plaintiffs' costs of the proceedings to date not otherwise dealt with, including previously reserved costs, be paid by the first to sixth defendants.

24 The defendants submit first that any determination of costs is premature, and alternatively that each party should bear their own costs. They further submit that the plaintiffs should pay the costs of the (former) seventh, and eighth, defendants.

25 The Attorney General submits that there should be no order as to costs, to the intent that each party bear its own costs.

26 The considerations relevant to the third order sought by the plaintiffs are generic in nature and therefore relevant to, though not necessarily determinative of, the first and second orders. It is therefore convenient to deal first with the third proposed order, which would govern the costs of the proceedings not the subject of any other specific order. As Young CJ in Eq made a costs order on 6 March 2009 in respect of the hearing of the questions determined by his Honour - that the defendants pay the plaintiffs costs (see [2009] NSWSC 106, [501]) - the subject matter of such an order would comprise:

(1) the proceedings (being a 13 day trial) on the questions determined by Hamilton J, culminating in his Honour's judgment of 4 April 2003 ([2003] NSWSC 262), in respect of which orders were first made on 26 November 2003 ([2003] NSWSC 1089), when all questions of costs not already determined were reserved. On the same day those orders were withdrawn, but the orders were finally made on 7 February 2007, when it was confirmed that the costs of the proceedings before his Honour remained reserved ([2007] NSWSC 70, [13]).

(2) the final proceedings (being a 21 day trial), before me, culminating in the judgment on 5 March 2012 ([2012] NSWSC 167);

(3) the associated interlocutory and consequential proceedings - save insofar as orders already made, or the first and second orders proposed above, deal with them.

27 I reject the defendants' submission that it is premature to deal with the question of costs. Insofar as this submission depended on the outstanding question of the accessorial liability of the first to fifth defendants, that has now been addressed, above. The other issues not yet resolved (such as whether the Association would be denied a right of indemnity out of the trust assets, and whether recourse to the trust property for the purpose of defraying its own costs was a breach of trust) are subsidiary to the initial resolution of the question of party/party costs. Those issues may well never require resolution, once the membership of the Association is brought into line with Church law as required by order 4(d) of 5 March 2012. But if they require resolution, they are properly informed by, rather than informative of, the party/party costs position, which first needs to be established. It is entirely practicable to deal now with the outstanding costs of the proceedings to date.

28 The plaintiffs contend that the order sought by them should be made, essentially on the ground that they have had substantial success in the proceedings as a whole, and relevantly both before Hamilton J and before me.

29 Before Hamilton J, the plaintiffs obtained determinations that the Association held the Schedule A property upon trust for use by the Association 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 such trust was a valid charity; and that it was not extinguished by the vesting of the property in the Association upon its incorporation. This involved rejection of the defendants' primary position that, at least after incorporation, the relevant property was held by the Association subject only to its constitution alone and free of any trust.

30 Before me, the plaintiffs succeeded in establishing that the property of the Association not dealt with by Hamilton J was (except in a minor and immaterial respect) held on the same charitable trust, and that six of eight alleged breaches of trust were established. While it is true that some of these breaches were ultimately not disputed at the trial, the plaintiffs nonetheless had to proceed to trial to establish them, and to obtain relief in respect of them. In addition, the plaintiffs succeeded in resisting the defendants' affirmative defence under (NSW) Trustee Act 1925, s 85, and also established accessorial liability against four of the five Committee Member defendants. However, the plaintiffs did not succeed in establishing that payment of litigation costs was an additional breach (a matter which received some considerable attention in the evidence and submissions), were not permitted to agitate fraud or wilful concealment or misrepresentation so as to engage s 63(2) (but in circumstances where the s 63 defence did not in any event avail the defendants), failed on their accessorial liability claim against Father Despotoski (but only because a just allowance was made in the latter's favour), and on their application for a general account. The defendants succeeded on their limitation defence.

31 It is true that the trust declared by Hamilton J, contrary to the plaintiffs' position, recognised and provided for the Association to be entitled to use the trust property. However, that was not the position primarily contended for by the defendants, whose primary position was that there was no trust at all. While the plaintiffs did not achieve a declaration in the terms in which they primarily sought, they did secure a determination to the effect that the Schedule A property - and ultimately, before me, all of the property of the Association - was held by the Association not only subject to its constitution, but upon a charitable trust for religious purposes to be applied in accordance with the tenets of the Macedonian Orthodox Church. In my view, the plaintiffs must be regarded as having obtained substantial success before Hamilton J. They had to come to court to obtain the relief that they did obtain, whereas had the defendants prevailed, the proceedings would have been dismissed there and then on the basis that no trust was established.

32 Ultimately, the plaintiffs secured not only that declaration - and in respect of all the Association's property - but also orders that vindicate the Bishop's authority and the position of Father Mitrev as Parish Priest, and bring the Association's membership into line with that of a Parish Assembly in accordance with the law of the Church.

33 The defendants submitted that at the essence of the plaintiffs' case was an attempt to subject the entirety of the Association's property to the ultimate control of the Bishop, unfettered by any considerations pertaining to the Parish of St Petka, including the removal of the Association as trustee for that purpose. There is no doubt that an object of the proceedings was to establish that the entirety of the Association's property was held on charitable trust for the purposes of the Macedonian Orthodox religion, and in that respect the plaintiffs have substantially succeeded. There is also no doubt that an object of the proceedings was to vindicate the authority of the Bishop, and in that respect also, the plaintiffs have substantially succeeded. In my view, attempts to characterise the proceedings and their objects in such as way as to support an argument that the plaintiffs have not substantially succeeded are artificial.

34 It is true, however, that there were some issues, some of which occupied a significant part of the evidence and hearing, on which the plaintiffs did not succeed, and I propose to recognise this by depriving the plaintiffs of a portion of the costs to which they would have been entitled had they been wholly successful.

35 In my view, in principle, the plaintiffs should be entitled to substantially the whole of their costs of (and associated with) the proceedings before Hamilton J; and to about two-thirds of their costs of the proceedings before me. Having regard to the relative duration of the proceedings before Hamilton J (13 hearing days) and before me (21 hearing days) - which, while not including the numerous directions and interlocutory hearings at both stages, nonetheless provides a rough basis for an overall apportionment - I would prima facie (and subject to the issues addressed below) be inclined to order that the sixth defendant Association pay 75% of the plaintiffs' costs of the proceedings not otherwise the subject of a specific costs order, including reserved costs.

36 The defendants however submit that no costs order should be made, on the basis that these were analogous to "public interest" proceedings, this being litigation concerning the administration of a trust for religious purposes, in the context that there was widespread opposition to initiatives of the Bishop, and where the defendants' case was an arguable one. In particular, the defendants submit that resolution of a dispute such as that underlying this litigation does not readily lend itself to application of any compensatory principle including as to costs as defiance of a Bishop by parishioners is not a compensable grievance, and that a religious leader ought not be entitled to costs when he or she takes steps, albeit within the court system of a particular polity, to assert its authority over a body of followers who take a different but genuinely held view on matters of religious administration. This submission was supported by the Attorney General, who refers to the extraordinary nature of the proceedings, and the jeopardy that would be occasioned to trust property if costs orders were made against the Association whose assets are trust property.

37 Young CJ in Eq rejected a similar submission - to the effect that the defendants ought not be required to pay the plaintiffs' costs because "they had adopted a defensive stance" in the name of a greater cause - at an earlier stage of the proceedings, observing - accurately, as it seem to me with respect - that this was "adversarial litigation par excellence".

38 The more relevant question is, why should a party who represents the beneficial interest and successfully brings proceedings to enforce a charitable trust not be indemnified in respect of the costs of doing so by the unsuccessful defendants? Ultimately, it would be more unjust to require the plaintiffs, who represent the beneficial interest and have substantially succeeded in enforcing the trust obligations annexed to the trust property, to bear their own costs of doing so, than to require the Association, which has misguidedly resisted that course, to do so.

39 The defendants submit that a costs order ought not be made against them for the additional reason that, if the Association be permitted to have recourse to trust assets to satisfy it, the trust assets will be depleted and applied to that extent for purposes other than the charitable purposes of the trust; whereas if not permitted to have such recourse the Association has no other assets, so that the burden would fall on the Committee Members. However, it is inappropriate at this point to speculate on the outcome of the question whether recourse to trust assets will be permitted, which may never have to be determined; at this stage, the question is only whether the plaintiffs should bear their own costs, or whether the defendants should indemnify them, at least to some extent. It may be that it will transpire that trust assets will be available - and will be the only assets available - to satisfy any such order, but that is no reason not to make an order; it will rightly be a matter for the plaintiffs to decide whether they wish to enforce any costs order against trust assets.

40 The defendants also submit that no order should be made against the individual defendants - that is, the Committee Members. It was submitted that their joinder to the proceedings was not necessary and could only be explained by a desire to punish them. However, the proceedings sought relief against the Committee Members as accessories. In that context - in respect of which the plaintiffs have succeeded as against four of the five Committee Members - they were necessary parties. They defended the proceedings actively, by solicitors and counsel who appeared for them as well as for the Association. It was necessary for the plaintiffs to establish, as against them as well as against the Association, that the Association held its property on a valid charitable religious trust. They have already been ordered by Young CJ in Eq to pay the costs (jointly and severally with the Association) of the proceedings on the questions before his Honour. However, in the proceedings before me, only a relatively small portion of the case was relevant to their liability as accessories: it was necessary for the plaintiffs to establish that employment of Father Despotoski and Father Dzeparovski was in breach of trust, which was not disputed. It was then necessary to establish the criteria of accessorial liability, as they did against four of the Committee Members. Pursuit of accessorial liability certainly occupied some time in evidence, cross-examination and submissions. That said, the magnitude of the plaintiffs' success against them was limited, amounting to their liability in respect of the remuneration paid to Father Despotoski and Father Dzeparovski, during the confined period while they remained committee members. The defendants succeeded on the Limitation Act defence.

41 In principle, the four Committee Members who I have found liable as accessories should be jointly and severally liable with the Association for the costs of the proceedings before Hamilton J, and for about a fourth of the costs to which the plaintiffs are otherwise entitled of the proceedings before me. On a broad-axe overall approach, they should be jointly and severally liable with the Association for one-third of the costs for which the Association is liable - that is to say 25% of the plaintiffs' costs of the proceedings not otherwise the subject of a specific costs order, including reserved costs.

42 I turn then to the costs of the Association's cross claim filed on 16 December 2004, which sought orders that the Bishop not interfere with Father Alexovski performing services under his employment contract with the Association that did not involve conducting religious ceremonies on the Association's real property, nor interfere with the Association fulfilling its responsibilities under its sponsorship with respect to a visa granted to Father Alexovski (on the basis that the Association would not require him to conduct religious services on its real property without the Bishop's authorisation), nor require Father Alexovski to officiate at services of the church.

43 On 27 March 2008, Young CJ in Eq observed ([2008] NSWSC 293, [45]-[46]), that the proceedings on the cross claim had never been continued by way of pleadings (as had been ordered on 16 December 2004), and stayed the cross claim until a pleaded cross claim was filed, time to do which was extended to 17 November 2008 or further order. However, no pleaded cross claim was thereafter filed. On 1 December 2008, Young CJ in Eq observed that nothing had happened in that respect until a document to serve as a cross claim was handed up, which claimed damages for inducing breach of contract in connection with the attempted appointment of Father Alexovski. His Honour took the view that the cross claim raised completely different and separate issues from the substantive proceedings and that if it were allowed it would be decided separately and after all other issues, in which case it might as well be brought in a separate suit. His Honour concluded:

So far as the present cross claim is concerned, the order must be that the cross claim is dismissed and that the costs of the cross claim be paid by the cross claimants to the cross defendants.

44 The Associate's record of proceedings on 1 December 2008 records that his Honour made an order that the cross claim be dismissed with costs. The court computer record maintained under UCPR r 36.11 does not contain any reference to that order, but it is plain that it was made.

45 The Association submits that the cross claim was overtaken by events in which the first plaintiff was complicit and of which the Association had received no notice until the day before it informed the court on 21 December 2004 of its application to dissolve the injunction restraining the Bishop from requesting or instructing Father Alexovski to officiate as a priest at the Frederick Street, Rockdale church. The Association submits that by so acting Father Alexovski repudiated his contract of employment with the Association, which the cross claim was directed to prevent the Bishop from interfering with, so as to render the cross claim futile. However, this fails to explain why the cross claim remained on foot until it was dismissed - and not at the invitation of the cross claimant - on 1 December 2008. In any event, this was not a case in which the cross claim was rendered futile by reason that the cross claimant achieved practical success. Even if, as the Association submits, Father Alexovski repudiated his alleged employment contract with the Association (which I do not accept is established by his having conducted a service at the Frederick Street church), that would not render a claim for damages for interference with contractual relations futile.

46 There is no sufficient reason to reopen the conclusion reached by Young CJ in Eq on 1 December 2008. The proper occasion for argument in respect of a different costs order was then. As a costs order was made by his Honour, it is unnecessary to make a further order in that respect now.

47 I turn then to the question of the motions of August, September and October 2003, the background to which is the interlocutory regime that had been established for use of the church following Hamilton J's judgment in 2003.

48 On 13 August 1997 and 20 January 1998, Hamilton J had made interlocutory orders dealing, to some extent, with the question of which priest or priests were to act as Parish Priest. An aspect of this was an undertaking to the court given by the plaintiffs, without admissions, on 20 January 1998 in response to an application by the defendants for an injunction, that the plaintiffs would not seek to enter or remain on or approach the premises except for the purpose of attending religious services at the church within the premises in the ordinary way (but not for the purposes of conducting any religious service or holding any meeting) and only between the hours of 7.30 am and 4.30 pm on Mondays to Saturdays and 6.00 am and 6.00 pm on Sundays until 2 February 1998 or further order of the court; or instruct or invite any person to conduct any religious service at the premises.

49 After Hamilton J's determination of the preliminary questions on 4 April 2003, which established the existence of a relevant trust, the plaintiffs' solicitors on 15 April 2003 wrote to the defendants' solicitors, observing that it had been found that the church property must be used in accordance with the tenets of the Macedonian Orthodox Church, pointing out that Father Mitrev had been appointed Parish Priest by the Bishop who was the relevant appointing authority and accordingly that Father Mitrev should be permitted to resume his office immediately, and seeking confirmation that the defendants would permit him to do so without further delay. On 17 April 2003, the plaintiffs' solicitors sought an assurance that the defendants would take all steps necessary to ensure that the Easter services would be conducted by the Bishop and Father Mitrev and the church reconsecrated by the Bishop. They also sought the release of the undertakings given on 20 January 1998 in order to permit such services to take place. Those requests were rejected by responses of 17 and 23 April 2003. A further proposal by the plaintiffs on 12 May 2003 that, as an interim compromise, and pending resolution of the outstanding issues, the Bishop appoint as the Parish Priest Father Boyceski - a duly ordained priest based in Melbourne - was also rejected by the defendants. A further proposal of 26 June 2003, that Father Mitrev be reinstated as Parish Priest to preside at services on alternate Saturdays and Sundays, while either or both Father Boyceski or Father Alexovski also be appointed Parish Priest to preside at services on the other Saturdays and Sundays, and that the Bishop expeditiously conduct a short form reconsecration service, was also not accepted.

50 Those proposals not having found favour with the defendants, the plaintiffs applied to the court for new interlocutory orders, which were made on 3 July 2003 and superseded the previous regime. His Honour described the position as follows (see [2003] NSWSC 594, [11]-[12]):

The decision is a very difficult one. The present interlocutory regime has been successful. As I originally decided, there is a prima facie case that Father Mitrev's dismissal as priest was not valid and he still validly holds that office. Equally, there is a prima facie case that the dismissal was valid and he does not hold the office. The decision that I have come to in all the circumstances is, however, that some use of the church premises by Father Mitrev should be permitted. However, rather than there being an alternation of services on Saturdays and Sundays between the two priests, the view I take, particularly in view of the fact that the defendants are now prepared to accept a priest nominated by the Bishop, is that it is the priest who is in temporary office as priest at the church who ought conduct the usual weekly services on Sundays. However, if Father Mitrev desires to conduct services for his congregation on Saturdays, either regular celebrations of the liturgy or services by way of wedding, funeral or otherwise, he ought be able to do that. In view, however, of the prima facie case that he has been dismissed as parish priest, I shall not make any order that would compel the sixth defendant at this stage to remunerate Father Mitrev for carrying out any function.

I made it quite plain early in the hearing of the application that I was not minded in this delicate situation to allow unlimited access to the church by Father Mitrev or, indeed, by the Bishop. In that context, the other thing that is asked of me is that the Bishop should be permitted to attend the church on two occasions to carry out a preliminary reconsecration and a second more formal reconsecration. The Bishop believes this is necessary because of the desecration of the church by the celebration of services by clergy not qualified to celebrate them. The defendants argue that it is not clearly established that such a reconsecration is necessary, although, as I understand it, they do concede that the Bishop holds that belief. In those circumstances, I am prepared to permit the Bishop to attend the church on two occasions to carry out services of reconsecration. In doing this, I should say at once that I am not expressing any view as to whether or not reconsecration is necessary. Those occasions should be on Saturdays when the church is in any event available to Father Mitrev. The mechanism for permitting the access that I contemplate to the Bishop and Father Mitrev will be a variation of undertakings they have given to the Court and which are still in force not to enter the church. In addition, the services of reconsecration should be limited to what is liturgically necessary for the purposes of reconsecration and there should not be associated with them any other liturgical or general event.

51 Subsequently, on 3 July 2003, when making orders to give effect to the new interlocutory regime, his Honour gave additional reasons explaining certain variations to what had been proposed in the above ([2003] NSWSC 608, [2], [3], [5]):

It has now been specified that the Bishop will conduct the first service of reconsecration on Saturday 12 July 2003. That will be specified in the order. The Bishop and Father Mitrev may enter the church and have the use of it for the whole of that day for the purposes of carrying out that ceremony.

The priest whose services will be procured by the Bishop for the sixth defendant will be Father Kiselinov. He will enter upon his duties on Sunday, 13 July 2003. In view of the difficulties that arose during the course of last Tuesday I propose to make the orders for the use of the church after 12 July 2003 by Father Mitrev and by the Bishop for the second reconsecration ceremony conditional upon the continuing provision by the Bishop of a priest acceptable to the sixth defendant to act as priest at the church. I regard it as vital to the conduct of the whole scheme which has been devised that there be effective and working use of the church by the parties on each side during the times allotted to them.

The only matter as to which there is a substantial departure from my judgment is as to the question of use of the church on Saturdays. In my judgment I indicated that the whole of each Saturday should be available to Father Mitrev. However, the question of weddings, funerals and christenings, which was not previously mentioned, has been drawn to my attention. That regime would exclude the defendant's side from the use of the church for these ceremonies on Saturdays. ... In those circumstances, it seems fair to me that on every second Saturday Father Mitrev's use of the church should be confined to the time up to 1pm so that he can conduct a morning service. On those days the use of the church will return to the defendants in the afternoon for the holding of ceremonies.

52 His Honour specifically made no order as to the costs of the proceedings that culminated in those orders.

53 As is apparent from the above, the new regime afforded the Bishop and Father Mitrev a distinct though limited role in the affairs of St Petka. However, on 12 July 2003 the Bishop was prevented from entering to perform the reconsecration by picketers who blockaded the church. The plaintiffs' solicitors sought undertakings, on 23 July 2003, that the defendants would permit the reconsecration to take place, discourage any protest that would impede it, and cooperate in preventing impediments to its performance. On 25 July 2003, the defendants offered to make the church available for the Bishop on any weekday to conduct a service of reconsecration, but otherwise declined to give those undertakings. The plaintiffs then filed their Notice of Motion of 5 August 2003 seeking variations of the interlocutory regime to permit the reconsecration to occur on 9 August 2003 and to be conducted by the Bishop and Father Mitrev, and that the defendants take all necessary steps to permit access in accordance with Hamilton J's orders.

54 Master Macready (as his Honour then was) on 6 August 2003, and then Young CJ in Eq on 27 August 2003, made further orders varying the interlocutory regime. As Master Macready observed in reasons given on 5 August 2003:

It is apparent from his Honour's judgment that the question of Father Mitrev taking part in the life of the parish was an important matter and it led to him framing his orders giving him a right to be present at certain times ...

It is also important that the parties appreciate this is a matter which his Honour gave considerable consideration to and decided, as a result of his considerations of the various applications before him, that it was appropriate that Father Mitrev play a part in the role of the church. Those who do not wish to participate in that role are free not to, as his Honour pointed out.

55 On 6 August 2003, Master Macready made orders that included the following:

2. Order that the Defendants by themselves, their servants and agents take all necessary steps to permit the Plaintiff to have access to the Church in accordance with Hamilton J's orders as further varied.

3. Note that for the purposes of these Short Minutes 'the Church ' is that part of the property of the Sixth Defendant which has been used as the Church for divine and other religious services since ... 2001.

56 From 27 August 2003 the interlocutory regime was as follows ([2003] NSWSC 1007, [4]):

Upon the plaintiffs by their counsel giving to the Court the usual undertaking as to damages,

1 Order the eighth defendant be restrained from officiating at any service in the church of St Petka Rockdale ('the church') until further order.

2 [omitted]

3 Order that the defendants permit the second plaintiff to conduct services including weddings christenings and funerals in the church on the Saturdays specified in the Schedule to these orders.

4 Order that after Saturday 16 August 2003 the defendants permit the second plaintiff to conduct divine service in the church on each Saturday not specified in the Schedule up to and including 2 7 March 2004 provided that such service is concluded by 1pm.

5 Order that the defendants permit the first but not second plaintiff to conduct on Friday 8 August 2003 a service in the church in honour of St Petka the patron saint of the church provided that such service including any service of reconsecration is concluded by 2pm.

6 [omitted]

7 Order that each of the plaintiffs be released from his undertaking given to the Court on 20 January 1998 to the extent necessary to permit him to enter the church to conduct the services permitted in orders 2, 3, 4, 5 and 6. In the case of the first plaintiff this release is on condition that the only content of the services in orders 2 and 6 shall be celebration of those rites which are liturgically necessary for the purposes of the reconsecration of the church.

8 Order that the defendants shall not by complying with orders 3, 4 and 5 come under any liability to remunerate the second plaintiff.

9 Order that the operation of orders 3, 4 and 5 shall be conditional on the first plaintiff procuring Gligor Kiselinov or any other priest acceptable to the defendants to act as a priest at the church from and including Sunday, 8 August 2003 until the installation of Zoran Alexovski.

10 Note the agreement of the first plaintiff and the sixth defendant that:

(a) the sixth defendant will promptly do all things reasonably necessary on its part to appoint Zoran Alexovski to the position of a priest at the church and to make arrangements for and to pay his remuneration;

(b) the first plaintiff will promptly do all things reasonably necessary on his part to appoint Zoran Alexovski to the position of a priest at the church;

(c) the first plaintiff and the sixth defendant will cooperate to expedite Zoran Alexovski 's immigration to Australia for the purpose of performing the duties of a priest at the church;

(d) the first plaintiff will do all things within his power to procure Gligor Kiselinov or another priest acceptable to the defendants to act as a priest at the church and will not do anything to prevent or discourage him from so acting pending the availability of Zoran Alexovski to act as a priest at the church.

(e) nothing in this agreement shall be taken as a concession or conduct evidencing or otherwise affecting their respective positions in the litigation concerning the power of appointing priests and related matters;

(f) the obligations of the first plaintiff under this agreement are conditional upon reconsecration of the church taking place.

57 Thus the interlocutory regime that operated from August 2003 conferred significant rights of access to the church on the plaintiffs, including provision for some use of the church by Father Mitrev - notwithstanding that, as Hamilton J had recorded, the defendants had "strongly pressed" on the court "that the interlocutory regime of exclusion of Father Mitrev should continue" ([2003] NSWSC 594 [10]).

58 The Association then filed motions, on 3 September and 16 October 2003 seeking orders compelling the Bishop to authorise the use of antimension at the church hall, and to procure Father Kiselinov or another person acceptable to the Association to act as priest including officiating at services in the church hall, together with orders discharging those made by Hamilton J permitting Father Mitrev access to the church to conduct services. Those applications were dismissed by Barrett J (as his Honour then was) on 5 November 2003 ([2003] NSWSC 1007). In relation to costs, his Honour said (at [34]):

In the ordinary way, the plaintiffs must be regarded as entitled to an order for costs but, bearing in mind the nature of the parties' relationship, I shall defer making any such order unless and until the parties seek it.

59 The ultimate outcome of the proceedings before me has vindicated the entitlement of the Bishop and Father Mitrev at all times to have access to the church for the purpose of conducting services in it. Indeed, this was ultimately hardly controversial, as the defendants did not dispute that there had been a breach of those terms of the trust found by Young CJ in Eq relating to the exclusion of Father Mitrev as Parish Priest. The proceedings on the motion filed 5 August 2008 and dealt with by Master Macready on 6 August and Young CJ in Eq on 27 August 2008 were brought by the plaintiffs in aid of their rights under the extant interlocutory regime, which had been frustrated by the blockade of 12 July 2003. In substance, the plaintiffs succeeded in obtaining additional orders to facilitate their exercise of their rights and performance of their functions under the interlocutory regime. The application was necessitated by the circumstance that, so far, the operation of that regime insofar as it conferred rights on them had been frustrated.

60 The motions that were disposed of by Barrett J on 5 November 2003 filed on 3 September and 16 October 2003 were brought by the Association and were unsuccessful. His Honour was of the view that the plaintiffs were entitled to an order for costs, though in the circumstances his Honour deferred making one.

61 In my view, the plaintiffs' entitlement to the costs of these motions is supported by:

(a) their being necessitated by the frustration (by the blockade) of the then interlocutory regime;

(b) the plaintiffs substantial success on the motions;

(c) in respect of the motion of 5 August 2003, that it was in aide of enforcement of the plaintiffs' rights under pre-existing orders;

(d) in respect of the motions of 3 September and 16 October 2003, Barrett J's view that the plaintiffs must be regarded as entitled to their costs;

(e) that the entitlement of the Bishop and Father Mitrev to access the church and conduct services in it has ultimately been vindicated in the substantive proceedings.

62 The Association must therefore pay the plaintiffs' costs of the plaintiffs' motion filed 5 August 2003 (and the proceedings culminating in the orders made by Young CJ in Eq on 27 August 2003), and of the Association's motions filed 3 September and 16 October 2003.

63 The defendants submitted that the plaintiffs should be ordered to pay the costs of the eighth defendant, Father Despotoski, who I found liable as a knowing recipient, though his liability was offset by his entitlement to a just allowance for his services, so that ultimately he was not liable to account to the trust. The plaintiffs do not seek an order against Father Despotoski. The case against him added little to the proceedings as a whole. In circumstances where he was prima facie liable as an accessory but escaped actual liability by reason of his entitlement to a just allowance, I do not consider a costs order in his favour is warranted.

64 The defendants also submitted that the plaintiffs should be ordered to pay the costs of the seventh defendant, Father Dzeparovski, who (having ceased to be engaged to act as parish priest) was at his own request dismissed from the proceedings on 31 October 2000, the Court reserving all questions of his costs. He has not thereafter appeared in the proceedings, and it is not apparent that the solicitors for the other defendants continue to act for him, nor on whose instructions they now seek a costs order in his favour. It follows from the outcome of the proceedings in respect of Father Depotoski that had Father Dzeparovski remained a defendant, it is probable that he would have been found to be liable as a knowing recipient, but that his liability would have been offset by a just allowance. In those circumstances, as with Father Depotoski, the appropriate outcome is that there be no order in respect of his costs.

65 It appears that the defences of the Committee Members were funded by the Association, and it is not apparent that the defence of Mr Minovski incurred any additional costs. I do not consider that his success in those circumstances is such as to justify a costs order in his favour.

Orders

66 My conclusions may be summarised as follows.

67 The Committee Members (other than Mr Minovski) knew that the Association was an integral part of the Macedonian Orthodox Church, and that its substratum included the law and doctrine of the church. They knew that according to the law and doctrine of the church, a parish priest could not be removed or replaced except by the Bishop, and that a priest not appointed by the Bishop achieved nothing. They knew that the Bishop did not approve or authorise the removal of Father Mitrev or the appointment of Father Dzeparovski or Father Despotoski. In that context, belief that their own Constitution authorised them to act as they did is insufficient to dispel a conclusion that they knew that, in procuring the Association to appoint and remunerate a priest not approved by the Bishop, they were transgressing ordinary standards of honest behaviour.

68 Each of the defendant Committee Members other than Mr Minovski is liable as an accessory to account to the trust for the emoluments paid to Father Dzeparovski and Father Despotoski while that Committee Member remained in office, except payments made prior to November 1997 in respect of which the claim is statute barred.

69 The Association should pay 75% of the plaintiffs' costs of the proceedings not otherwise the subject of a specific costs order, including reserved costs. The first, second, fourth and fifth defendants should be jointly and severally liable with the Association for one-third of the costs for which the Association is liable - that is to say 25% of the plaintiffs' costs of the proceedings not otherwise the subject of a specific costs order, including reserved costs.

70 There is no reason to reopen the conclusion reached by Young CJ in Eq on 1 December 2008 in respect of the costs of the cross claim. As a costs order was made by his Honour, it is unnecessary to make a further order in that respect now.

71 The Association should pay the plaintiffs' costs of the plaintiffs' motion filed 5 August 2003 (and the proceedings culminating in the orders made by Young CJ in Eq on 27 August 2003), and of the Association's motions filed 3 September and 16 October 2003.

72 There should be no order in respect of the costs of Father Despotoski, Father Dzeparovski, and Mr Minovski.

73 My orders therefore are:

1. Order that, in the account referred to in order 5 of 5 March 2012, there also be certified, in respect of each of the First, Second, Fourth and Fifth Defendants, the amount of the payments in money or money's worth made after 26 November 1997 while such defendant remained a member of the Council of the Sixth Defendant, by the Sixth Defendant to the former Seventh Defendant and the Eighth Defendant.

2. Order that the Sixth Defendant pay the Plaintiffs' costs of the Plaintiffs' motion filed 5 August 2003 (and the proceedings culminating in the orders made by Young CJ in Eq on 27 August 2003), and of the Sixth Defendant's motions filed 3 September and 16 October 2003.

3. Order that the Sixth Defendant Association pay 75% of the Plaintiffs' costs of the proceedings, including reserved costs, not otherwise the subject of any specific costs order (including any specific "no order"), and that the First, Second, Fourth and Fifth Defendants be jointly and severally liable with the Association for one-third of those costs, that is to say 25% of the Plaintiffs' costs of the proceedings not otherwise the subject of any specific costs order.

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Decision last updated: 11 January 2013