In the matter of Asbestos Injuries Compensation Fund Limited (and WorkCover Queensland) (No 2) [2024] NSWSC 1238 (3 October 2024)

Last Updated: 3 October 2024

Supreme Court New South Wales

Case Name:	In the matter of Asbestos Injuries Compensation Fund Limited (and WorkCover Queensland) (No 2)
Medium Neutral Citation:	[2024] NSWSC 1238
Hearing Date(s):	On the papers, last submission 27 September 2024.
Date of Orders:	3 October 2024
Decision Date:	3 October 2024
Jurisdiction:	Equity - Expedition List
Before:	Rees J
Decision:	Cost orders made.
Catchwords:	COSTS – trustee seeks judicial advice – interested parties granted leave to appear – adversarial proceedings – whether interested parties entitled to be indemnified from trust fund – principles at [20]-[29] – repetition of arguments by multiple counsel – trustee’s submissions accepted – costs of interested parties unquantified despite request from the Court – requirement of interested parties to act reasonably, including avoiding duplication.
Legislation Cited:	James Hardie Former Subsidiaries (Winding Up and Administration) Act 2005 (NSW) Workers’ Compensation and Rehabilitation Act 2003 (Qld)
Cases Cited:	Armet v Browne [2024] WASCA 44 Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414; (2011) 82 NSWLR 336 Bull v Lee (No 2) [2009] NSWCA 362 Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246 Dybac v Czerwaniw [2022] NSWSC 1484 Hughes v NM Superannuation Pty Ltd & Anor (1993) 29 NSWLR 653 Huynh v Attorney General (NSW) [2021] NSWCA 297; (2021) 107 NSWLR 75 In the matter of All Class Insurance Brokers Pty Ltd (in liq); Vardy v Westpac Banking Corp [2014] NSWSC 475 In the matter of Asbestos Injuries Compensation Fund Limited (and WorkCover Queensland) [2024] NSWSC 1163 In the matter of BBY Ltd (receivers and managers apptd) (in liq) (No 3) [2018] NSWSC 1718 In the matter of Perpetual Investment Management Ltd (as responsible entity for Perpetual’s Monthly Income Fund and Perpetual’s Wholesale Monthly Income Fund) [2011] NSWSC 615 Morelli (liquidator), in the matter of FW Projects Pty Limited (in liq) v White Hills Pty Ltd (No 2) [2024] FCA 955 Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816 Re Asbestos Injuries Compensation Fund Ltd (as Trustee for the Asbestos Injuries Compensation Fund) [2018] NSWSC 589 Re Buckton [1907] UKLawRpCh 98; [1907] 2 Ch 406 Re Estate Late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844 Reeves v Reeves (No 2) [2024] NSWSC 386 Sons of Gwalia Ltd v Margaretic (2006) 232 ALR 119; [2006] FCAFC 92
Texts Cited:	Lynton Tucker, Nicholas Le Poidevin KC, James Brightwell, Lewin on Trusts (20th ed, 2023, Law Book Co)
Category:	Costs
Parties:	Asbestos Injuries Compensation Fund Limited (Plaintiff) Attorney-General (NSW) (Intervenor) Eric Coveney (First Interested Party) Barry Davis (Second Interested Party) WorkCover Queensland (Third Interested Party) James Hardie 117 Pty Ltd (Fourth Interested Party)
Representation:	Counsel: P Brereton SC/C Tran (Plaintiff) D Hume (Intervenor) B Walker SC/A Giurtalis (First Interested Party) S Robertson SC/S Tzouganatos (Second Interested Party) D Campbell KC/K Holyoak (Third Interested Party) J Lockhart SC/M Gvozdenovic (Fourth Interested Party) Solicitors: Baker McKenzie (Plaintiff) Crown Solicitor (NSW) (Intervenor) Maurice Blackburn (First Interested Party) vbr Lawyers (Second Interested Party) BT Lawyers (Third Interested Party) McCullough Lawyers (Fourth Interested Party)
File Number(s):	2024/121682

JUDGMENT

1. HER HONOUR: I gave judgment in this matter on 13 September 2024: In the matter of Asbestos Injuries Compensation Fund Limited (and WorkCover Queensland) [2024] NSWSC 1163. I gave judicial advice along the lines sought by the plaintiff trustee and made an order that the trustee be indemnified for its costs from the trust fund (the SPF).
2. I had earlier granted leave to a number of interested parties who sought to be heard, including WorkCover Queensland, Barry Davis and Eric Coveney. During the hearing, these parties indicated that they would seek an order that their costs of so appearing be paid on an indemnity basis out of the SPF. I made directions that any party seeking such an order provide an affidavit and submissions in support. I also informed the parties:

“... if a party wants a specific costs order, can they think about it before automatically making the application. Don't assume I will make an order. Can you please think about the extent to which the submissions actually were accepted or added any value and the extent to which the SPF should be called upon to meet the parties' costs at all. If you want to seek costs you need to give me some detail as to what they are, numbers.”

3. I have since received written submissions but no affidavits from WorkCover Queensland, Mr Davis and Mr Coveney. These submissions did not supply the information sought. The trustee has filed submissions in reply, as directed.
4. I also received submissions in reply sent without leave by Mr Coveney. The Court may (and generally will) decline to engage with submissions sent without leave after the conclusion of a hearing: Huynh v Attorney General (NSW) [2021] NSWCA 297; (2021) 107 NSWLR 75 at [249] (per Leeming JA); Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 at [57], [59], [61] (per Allsop P, Giles JA and Tobias AJA); Armet v Browne [2024] WASCA 44 at [49]- [50] (per Mitchell, Vaughan and Hall JJA); Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246 at 258 (per Mason J); Bull v Lee (No 2) [2009] NSWCA 362 at [9] (per Allsop P, Campbell and Young JJA). Accordingly, I have put these submissions to one side.

Facts

5. The James Hardie Group established a special purpose trust fund (the SPF) to pay asbestos-related claims against former subsidiaries (Liable Entities), including Amaca Pty Ltd. The plaintiff, Asbestos Injuries Compensation Fund Ltd (AICF) is the trustee of the SPF. AICF pays claims on behalf of Liable Entities under a “tripartite arrangement” comprising the James Hardie Former Subsidiaries (Winding Up and Administration) Act 2005 (NSW) (the Winding Up Act), a funding agreement and a trust deed. The trustee may only use the SPF to pay a “SPF Funded Liability”. The funding agreement and trust deed excludes payment of claims to the extent that claims have been recovered under a “Worker’s Compensation Scheme or Policy”.
6. On 5 February 2024, the trustee wrote to WorkCover Queensland to clarify the respective positions of the trustee and the Liable Entities to repay statutory payments under s 207B(4) of the Workers’ Compensation and Rehabilitation Act 2003 (Qld). The trustee advised WorkCover Queensland that it was not possible to pay money to the extent that it reflected a liability or claim which had been recovered, or was recoverable, by the claimant under the Workers’ Compensation and Rehabilitation Act 2003 (Qld), given the terms of the Winding Up Act and the funding agreement.
7. At the time, Mr Davis and Mr Coveney had received workers’ compensation payments from WorkCover Queensland and were suing Amaca in the Dust Diseases Tribunal of New South Wales (the Tribunal). Letters in like terms to that sent to WorkCover Queensland were also sent by the trustee to Mr Davis and Mr Coveney’s solicitors.
8. On 21 February 2024, consent judgment was entered against Amaca in Mr Coveney’s proceedings. On 23 February 2024, WorkCover Queensland wrote to the trustee, demanding the amounts paid in workers’ compensation to Mr Coveney as a first charge from the judgment moneys, under s 207B of the Workers’ Compensation and Rehabilitation Act 2003 (Qld). Noting the trustee’s position as stated in recent correspondence, confirmation was sought as to whether the trustee adhered to that position, in which case WorkCover Queensland intended to commence legal proceedings.
9. On 8 March 2024, WorkCover Queensland commenced proceedings against Amaca and Mr Coveney in the Supreme Court of Queensland, seeking a declaration that Amaca was lawfully required to pay the whole of the judgment entered in the Tribunal, without deduction for the amount of compensation paid to Mr Coveney under the Workers’ Compensation and Rehabilitation Act 2003 (Qld).
10. Mr Davis obtained judgment against Amaca in his proceedings. On 13 March 2024, WorkCover Queensland wrote to the trustee, demanding the amounts paid in workers’ compensation to Mr Davis as a first charge from the judgment moneys, under s 207B of the Workers’ Compensation and Rehabilitation Act 2003 (Qld).
11. On 22 March 2024, the trustee advised WorkCover Queensland that it intended to seek judicial advice. Where the Winding Up Act required that such an application be made in this Court, it was suggested that the Queensland proceedings be cross-vested.
12. On 2 April 2024, the trustee commenced these proceedings. On 3 April 2024, the trustee also wrote to WorkCover Queensland in respect of Mr Coveney’s judgment sum, noting that, of the consent judgment entered, $162,280 and costs of $190,000 were over and above the amount of the judgment over which WorkCover Queensland asserted a charge. WorkCover Queensland was asked to indicate whether it claimed a charge over the remaining amount, so that the trustee could pay that amount to Mr Coveney as soon as practicable. Absent agreement from WorkCover Queensland that it would not seek recourse to those moneys, the trustee stated that it was not in a position to make this payment to Mr Coveney. There was no reply. The trustee sent a follow-up. There was no reply to this either.
13. Mr Davis, Mr Coveney, WorkCover Queensland and James Hardie 117 Pty Ltd filed motions seeking leave to be heard. The trustee did not oppose such leave. On 3 May 2024, I granted leave to appear and expedition. Given the number of parties appearing, finding a suitable hearing date was more difficult such that the matter was listed for hearing on 30 July 2024 for two days. The Queensland proceedings were transferred to this Court under s 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). The hearing proceeded as listed.
14. In my primary judgment, I concluded that the Winding Up Act and funding agreement together provided a mechanism by which a workers’ compensation authority such as WorkCover Queensland can recover payments from the SPF. This mechanism is very tightly circumscribed. WorkCover Queensland’s entitlement to reimbursement could be an SPF Funded Liability if it met the requirements of subpar (g) of the definition of Payable Liability – “Recoveries within the meaning and subject to the limits set out in clause 13.7” – but presently does not in the absence of any regulations making this a “statutory recovery claim”. The construction of the exception for which WorkCover Queensland contended was inconsistent with cl 13.7, where it is important to construe the provisions as a whole having regard to purpose and context.

Submissions

15. Mr Coveney sought an order that the trustee pay his costs of these proceedings on an indemnity basis, such costs to be paid from the SPF. Mr Coveney submitted that the trustee did not present an alternative or competing construction of these instruments. Mr Coveney contributed this to the process. As such, his costs should be considered as necessarily incurred for the benefit of the trust and paid out by the trust on an indemnity basis, being a party properly joined: Re Buckton [1907] UKLawRpCh 98; [1907] 2 Ch 406 at 414 (Kekewich J); Hughes v NM Superannuation Pty Ltd & Anor (1993) 29 NSWLR 653 at 671 (Sheller JA, with whom Kirby P and Meagher JA agreed); In the matter of Perpetual Investment Management Ltd (as responsible entity for Perpetual’s Monthly Income Fund and Perpetual’s Wholesale Monthly Income Fund) [2011] NSWSC 615 at [8]; In the matter of All Class Insurance Brokers Pty Ltd (in liq); Vardy v Westpac Banking Corp [2014] NSWSC 475 at [53]. The trustee consented to Mr Coveney appearing. The judicial advice referred to what the trustee ought do in respect of the judgment obtained by Mr Coveney against Amaca. Mr Coveney was entitled to protect his interests in respect of the judgment sum, particularly where the trustee had never sought to rely upon the construction of the relevant instruments which was advanced in these proceedings. The approach adopted by the trustee to the judgment obtained by Mr Coveney was said to be “novel” and untested. (I note there is no evidence of this.)
16. Mr Davis sought his costs on an indemnity basis as well, where such an order had been made in previous applications by the trustee for judicial advice: Re Asbestos Injuries Compensation Fund Ltd (as Trustee for the Asbestos Injuries Compensation Fund) [2018] NSWSC 589 at [154], [156]. Reliance was placed on Re Buckton [1907] UKLawRpCh 98; [1907] 2 Ch 406 too. Mr Davis’ participation was said to be necessary and appropriate in light of s 55(10) of the Winding Up Act. It was said to be necessary and appropriate for Mr Davis to assume the role of contradictor in relation to prayer 3 of the Summons in circumstances where the trustee had advanced a positive case as if in ordinary inter partes proceedings rather than taking the conventional approach on judicial advice applications of seeking to expose what the trustee sees as the competing arguments for and against the giving of particular judicial advice. Mr Davis’ costs should be regarded as necessarily incurred for the benefit of the SPF and payable by the trustee.
17. WorkCover Queensland sought an order that its costs be paid by the trustee on the indemnity basis and adopted the submissions made by Mr Davis and Mr Coveney. Its costs were said to be necessary and incurred for the benefit of the SPF. WorkCover Queensland’s interests were central to the advice sought. Section 51(1) of the Winding Up Act was said to make it “necessary and appropriate” for WorkCover Queensland to have participated; such participation was not opposed by any party. (I am not sure this is right; s 51(1) provides that a person with a claim against the trustee may apply to this Court for an order with respect to things to be done or not to be done to complete the winding up of a liable entity. WorkCover Queensland certainly had a claim against Amaca, it is not entirely clear the basis of its claim against the trustee.) WorkCover Queensland submitted that it was a proper contradictor in respect of a number of the issues raised by the Summons where the trustee advanced a positive (and adversarial) case requiring competing submissions.
18. The trustee submitted that Re Buckton was a useful guide, but did not constrain the Court’s discretion as to costs. Mr Coveney, Mr Davis and WorkCover Queensland participated in the application as adversaries, and not merely as proper contradictors. The trustee’s application was precipitated by the position which WorkCover Queensland took. The fact that all were separately represented was indicative of the reality that none took the role simply of contradictor. There was no need for more than one contradictor. While it may be accepted that the role played by (one of) Mr Coveney, Mr Davis and WorkCover Queensland spared the trustee from informing the Court of the competing constructions, the participation of Mr Coveney, Mr Davis and WorkCover Queensland went beyond that. Mr Davis and Mr Coveney sought orders requiring the trustee to pay certain sums to each of them. This showed the personal benefit which each sought from this proceeding. As such, the Court should approach the costs of Mr Coveney, Mr Davis and WorkCover Queensland on the basis that they were unsuccessful litigants in adversarial litigation. Having been wholly unsuccessful, they should not get any order as to their costs. Nor has the Court been given any detail about the quantum of the costs incurred, notwithstanding request.
19. In the alternative, the trustee submitted that the interested parties should not all get their costs, nor on an indemnity basis, given the considerable duplication between them and that no contention had been advanced explaining why separate representation was required and why the role of contradictor could not have been properly played by one of them. In light of the positions taken at the hearing, there was no reason for separate representation. In addition, the trustee submitted that the Court had not been informed about any relevant arrangements in place between Mr Coveney or Mr Davis and WorkCover Queensland as to costs. It was plausible and reasonable to suppose that WorkCover Queensland has agreed to fund the costs of Mr Coveney and Mr Davis. That is at least because WorkCover Queensland stood to benefit from the success of Mr Coveney and Mr Davis. The Court should proceed on the basis that WorkCover Queensland was funding Mr Coveney and Mr Davis, and that they will not be left out of pocket as to costs. (There was no evidence of this and I decline to make this assumption). If the Court was minded to make any costs order in favour of Mr Coveney, Mr Davis or WorkCover Queensland, the trustee submitted that they each get one third of their costs and only on the ordinary basis.

Consideration

20. The principles were summarised by Finkelstein J in Sons of Gwalia Ltd v Margaretic (2006) 232 ALR 119; [2006] FCAFC 92 at [5]- [10]:

“The best place to begin is with some basic rules. Re Buckton; Buckton v Buckton [1907] UKLawRpCh 98; [1907] 2 Ch 406 contains a classic statement of the principles upon which costs are awarded in cases involving trustees. There Kekewich J (who was a master of Chancery procedure) said that, broadly speaking, there are three kinds of disputes involving trustees. The first is an action brought by trustees relating to the construction of the trust instrument or some other question arising in the course of an administration. In Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 at 1223, Lightman J broadened this category by including within it “[every] dispute as to the trusts upon which [the trustees] hold the subject matter of the settlement.” For convenience he labelled these cases as “trust disputes”.

...

In a trust dispute the costs of all parties are treated as necessarily incurred for the benefit of the estate and are ordered to be paid out of the fund either on a solicitor and client or indemnity basis: Daniell’s Chancery Practice (7th ed, 1901) vol 1, 953, 955–957, 987; In re Buckton [1907] UKLawRpCh 98; [1907] 2 Ch 406 at 414; McDonald v Horn [1995] 1 All ER 961 at 970–971.”

21. The second and third class of dispute are not relevant here. Finkelstein J continued at [10]:

“Lightman J has identified a fourth class, which he labels “a third party dispute”. This is a dispute between the trustees and persons, otherwise than in their capacity as beneficiaries, in respect of rights and obligations assumed or incurred by the trustees in the course of administering the trust. Examples are actions in contract or tort. Here again as between the parties the costs are borne by the unsuccessful party. ...”

22. In this case, the trustee approached the Court for judicial advice on the administration of the SPF and the interpretation of the trust deed. None of the interested parties were beneficiaries of the trust. All had an interest in the question posed for judicial advice as, depending on the answer, the trustee may provide funds to Amaca, which funds may flow on to them. The interested parties fell more readily within the description of a “third party dispute” than a “trust dispute”, as described in Sons of Gwalia.
23. That does not mean that their participation in the application for judicial advice was necessarily inappropriate or unhelpful. As Lindsay J explained in Re Estate Late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844 at [198]- [199]:

“[I]f the jurisdiction of the Court to aid the due administration of trusts is to be exercised fairly, efficiently and beneficially, care needs to be taken to ensure that an application to the Court is not made ... without due engagement of persons who may have an interest in the outcome of a s 63 application.

... the ability of the Court to provide well measured advice may be affected to the extent that it is not given the benefit of a full appreciation of what competing interests might say if allowed an opportunity to inform the Court of a perspective different from that presented by a trustee appearing ex parte.”

24. As I noted in my primary judgment, the terms of the trust as it applied to WorkCover Queensland’s charge were open to debate, where the operation of the “tripartite arrangement” is complex and different interpretations of the statute, funding agreement and trust deed are available. The issue raised was also of importance, potentially to workers’ compensation schemes in other states and territories and other persons who may suffer an asbestos-related injury caused by James Hardie asbestos. The presence of a contradictor was useful in identifying other potential constructions of the tripartite arrangement as it applied to the problem at hand. The most obvious contradictor was WorkCover Queensland.
25. In their submissions, all parties contended that the proceedings were adversarial in nature, although disagreed on whether it was the trustee or the interested parties who took an adversarial stance. The relevance of this feature of the proceedings was explained in BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414; (2011) 82 NSWLR 336 by Campbell JA (with whom McColl JA agreed) at [213]: (citations omitted)

“... whether the costs of the court deciding the question that has arisen should be treated as costs of administration of the fund is significantly influenced by whether the proceedings are in substance adversarial ones. While where the costs should fall in litigation is always a matter of discretion, very commonly costs are paid from the fund for non-adversarial proceedings, and by the loser for adversarial proceedings.”

26. More recently in Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816, Colvin J summarised the position at [20]-[21]:

“Therefore, if a party’s participation is adversarial in the sense that it goes beyond that which is necessary in order to present the facts and address the issues so as to enable the court to provide advice for the purposes of the administration being conducted (in this case the receivership) then the approach to costs that applies to adversarial litigation should be applied. This is all the more so where the intervener participates to agitate a claim or position that has arisen from steps taken by the intervener.

On the other hand, if a party participates as a proper contradictor solely for the purpose of assisting the court in addressing the issues necessary to provide proper and appropriate judicial advice to the party seeking directions, then the approach to costs on applications concerning the administration of a trust, estate or fund should be applied. In such cases it is usual for all parties properly participating to be entitled to their costs on an indemnity basis paid out of the trust, estate or fund on the basis that they are costs of due administration.”

27. As indicated by the pre-litigation correspondence and the earlier proceedings commenced by WorkCover Queensland in the Supreme Court of Queensland, these proceedings were essentially adversarial. Specifically, WorkCover Queensland wished to enforce its statutory charge over judgments monies payable by Amaca. The trustee was the source of those funds. The trustee wrote to WorkCover Queensland (and the solicitors for Mr Davis and Mr Coveney) at length, as to how it was that the tripartite arrangement precluded the trustee from paying the judgment in the circumstances. WorkCover Queensland did not accept this and commenced proceedings.
28. The adversarial nature of the proceedings may also be seen in the written outlines provided before the hearing: the trustee’s opening outline was 12 pages while WorkCover Queensland’s opening outline was 56 pages. At the hearing, Mr Davis went beyond a contradictor and actively sought that the Court make orders in a form that he suggested, and was joined in this endeavour by Mr Coveney.
29. Many of the submissions advanced by Mr Davis, Mr Coveney and WorkCover Queensland were the same or similar. None of their submissions were accepted. The exposition of their multiple arguments made the hearing longer and my deliberations more protracted than would otherwise have been the case. The resulting judgment was delayed in an expedited matter.
30. The issue between the trustee and WorkCover Queensland has been determined. WorkCover Queensland failed to persuade the Court of its interpretation of the tripartite arrangement, in what was an adversarial contest between two sophisticated parties. WorkCover Queensland was, in essence, endeavouring to circumvent the detailed mechanism in the Winding Up Act and funding agreement by which a workers’ compensation authority can recover payments from the SPF. I consider it appropriate that the ordinary costs consequences should follow. WorkCover Queensland should pay the trustee’s costs of the proceedings.
31. As to Mr Davis and Mr Coveney, a beneficiary or interested party should not proceed on the assumption that their costs will be paid on an indemnity basis out of the trust fund, even if they conduct themselves in an adversarial manner or the arguments that they raise do not assist the Court. As the trustee submitted, “[s]ince beneficiaries are awarded costs by analogy to the trustees’ right of indemnity, beneficiaries are subject to the same requirement of reasonableness as applies to trustees”: Lynton Tucker, Nicholas Le Poidevin KC, James Brightwell, Lewin on Trusts (Law Book Co, 20th ed) at [48-041]. Further, ordinarily “[t]rustees should not be separately represented in litigation and will be entitled to only one set of costs between them” without good reason: Lewin on Trusts at [48-011]. Where the issues can be expected to be adequately canvassed by another beneficiary or interested party, seeking to be heard oneself may prove an expensive choice.
32. While I do not accept the trustee’s submissions that I should infer that Mr Davis and Mr Coveney’s legal teams were funded by WorkCover Queensland, I infer that their legal teams were funded by someone other than themselves, where their teams were large. That is why I asked for any party seeking an order that their costs be paid out the SPF to provide me with details in respect of what those costs were. I was not favoured with a response.
33. As my primary judgment canvassed, the SPF was established to provide funds over a 40-year period to pay personal injury claims made by those suffering from James Hardie asbestos-related diseases (including Mr Davis and Mr Coveney). The tripartite arrangement proceeds on the basis that the SPF may be inadequate to meet all claims, either for 40 years or in any given year, and includes a number of mechanisms to enable the available funds to go as far as possible. Against that backdrop, I am hesitant to impose upon the SPF unnecessarily to fund legal costs. In the absence of details as to what Mr Davis and Mr Coveney’s legal costs are and, having regard to the adversarial nature of the proceedings, the unnecessary duplication of arguments and the resulting delay in the disposal of the application, I am not prepared to make the costs order sought.
34. For these reasons, I make the following orders:

(1) Order WorkCover Queensland to pay the plaintiff’s costs of the proceedings.

(2) Otherwise make no order as to costs.

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