Background
Daniel John Frisken, as trustee of the EK Recruitment Creditors Trust, sought judicial advice and various orders regarding the trust’s management, including substantial variations to a Deed of Company Arrangement and Trust Deed, directions on trust termination, and advice on commencing proceedings against guarantors. The originating application, filed in January 2025, was significantly amended during argument and ultimately narrowed. The Deputy Commissioner of Taxation and the Guarantors, who stood to be directly affected by the relief sought, participated in the proceedings under leave to be heard, though they were not formally joined as parties.
Justice Jackman delivered substantive judgment on 9 March 2026, largely dismissing Frisken’s application. The trustee was successful only in obtaining certain limited judicial advice. This judgment addresses the costs consequences of those proceedings and whether Frisken is entitled to indemnification from the trust fund for costs orders made against him and his own legal costs.
The Court’s Holding
Justice Jackman ordered Frisken personally to pay three separate lump sum costs awards: $53,000 to E K Recruitment Pty Limited (the company), $43,721.82 to the Deputy Commissioner of Taxation, and $69,314.03 to the Guarantors (John Paul El-Bayeh and Rafayel El-Khoury). Critically, the court refused to allow Frisken to be indemnified or reimbursed from the Trust Fund for any of these adverse costs orders or for his own costs in the proceedings.
The court found that Frisken had conducted the proceedings inefficiently and had unnecessarily increased costs by pursuing numerous claims that were abandoned at the hearing or during argument. Justice Jackman noted that allowing indemnification from the trust fund would deplete assets available for distribution to beneficiaries, including the Deputy Commissioner of Taxation itself, thereby defeating the purpose of costs orders. The court held it was within its broad discretion under section 43 of the Federal Court of Australia Act 1976 to require a trustee to bear costs personally rather than being indemnified out of the trust fund, notwithstanding the trustee’s entitlement to indemnity under the trust deed or implied indemnity under the Trustee Act.
Regarding Madison Marcus Law Firm and Gerard Breen (the solicitors), the court declined to make a costs order in their favor. Applying the ordinary principle that persons given leave to be heard neither receive nor pay costs, the court found that while the solicitors made helpful submissions regarding statutory interpretation and drew attention to relevant legislative provisions, this was insufficient to justify deviating from the ordinary position and imposing a costs obligation on Frisken.
Key Takeaways
- A trustee conducting litigation inefficiently and pursuing abandoned claims may be denied personal indemnification from the trust fund for adverse costs orders, even where the trust deed would ordinarily provide such protection
- Courts exercise their discretion under the Federal Court Act to hold trustees personally liable for costs consequences when their litigation conduct is inefficient and unreasonably increases opposing parties’ expenses
- Third parties directly affected by relief sought should be joined as parties; if not joined, they may still be bound by judicial advice and entitled to costs if they participate in the proceedings
- The ordinary rule that a person given leave to be heard neither receives nor pays costs will not be displaced merely by making helpful or insightful submissions
Why It Matters
This decision establishes important limits on a trustee’s ability to recover litigation costs from trust assets when the trustee’s conduct of the proceedings is inefficient or unreasonable. Rather than allowing trust beneficiaries to bear the costs of a trustee’s unsuccessful and inefficiently conducted litigation, courts may require the trustee to bear those costs personally. This creates accountability for trustee decision-making and protects trust beneficiaries from depletion of trust assets through poor litigation strategy.
The judgment also reinforces principles about procedural regularity: where relief sought in trust proceedings directly affects third parties’ rights and liabilities, those parties should be formally joined. The decision clarifies that participation in proceedings and being bound by judicial advice does not automatically entitle such parties to recover costs merely for making submissions, even if those submissions prove helpful to the court’s reasoning.