Background
The plaintiff held 50% of the units in the Opus One Unit Trust, which was established to develop three Cronulla townhouses. The trustee borrowed money from Brock Jarvis, secured by a second-ranking mortgage over the remaining townhouse, after saying the trust required short-term funding. The plaintiff alleged that the facility and security arrangements were a breach of trust and sought to prevent repayment from the proceeds of the property’s sale.
Before the plaintiff filed its notice of motion, the defendants had provided the facility documents, details of three drawdowns, a deed extending the repayment date, and records showing advances totalling $268,500. The plaintiff later obtained access to the trust’s books. On the hearing date, consent orders provided for Mr Jarvis to be paid $305,926.08 on settlement, the proceeding to continue by pleadings, and dismissal of the motion.
The Court’s Holding
Richmond J ordered the plaintiff to pay the defendants’ costs of the motion on an indemnity basis. Although costs are commonly left unordered where an interlocutory matter resolves without a merits hearing, the Court was confident the defendants would almost certainly have succeeded had the motion proceeded.
The plaintiff had no tenable basis, when it filed the motion, to allege breach of trust in the loan transaction or deny Mr Jarvis repayment under his secured loan. By 30 July 2026 it had sufficient information to assess the transaction, and it could have pursued inspection before bringing the motion. Its subsequent abandonment of the claims, without an adequate explanation, and its plainly unreasonable decision to commence the motion justified indemnity costs.
Key Takeaways
- A party may receive costs after an interlocutory matter settles if it would almost certainly have prevailed on the merits.
- Abandoning claims does not alone warrant indemnity costs, but may do so where the claims were untenable when brought.
- A beneficiary with inspection rights should not bring a speculative trust-related motion before seeking available documents.
Why It Matters
The decision underscores that beneficiaries challenging trustee borrowing must have a tenable factual and legal basis before seeking to restrain payment to a secured creditor. Access to trust records and disclosures already available may make a later motion—and its costs exposure—avoidable.
It also illustrates the NSW Supreme Court’s willingness to award indemnity costs where a party pursues an interlocutory application that, properly advised, it should have known had no real prospects of success.