Decision Date: December 21, 2012
Link: Case Summary Document
Citation: [2012] NSWSC 1610 (Supreme Court of New South Wales, Brereton J)

Summary:

This case once again revisited the affairs of the Macedonian Orthodox parish of St Petka in Sydney. The litigation arose from a dispute about who controlled the property and affairs of the parish – was it the church hierarchy, represented by the bishop, Metropolitan Petar (the plaintiffs in this case); or was it the local church itself, constituted as an incorporated association? The earlier decisions had decided almost all the matters in contention in favour of the plaintiffs. Thus it had been held that:

1.      All the parish property was trust property (a charitable trust for religious purposes);

2.      There were substantial breaches of this trust by the parish association;

3.      Defences were not available (except where the action was statute-barred);

4.      Personal liability to account to the trust was established for the committee members.

This decision dealt with matters remaining from earlier judgements on the principal issues during 2012: see Metropolitan Petar v Mitreski [2012] NSWSC 16 (the principal judgement; see casenote) and Metropolitan Petar v Mitreski [2012] NSWSC 167 (the costs judgement). The remaining matters were the accessorial liability of the defendants who were committee members of the association, and costs.

In the principal judgement, His Honour held that all the committee members were liable as accessories. His Honour held (following on from the discussion in the High Court decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 at [161]–[165]) that third parties to a trust can still be liable for breach of trust if they knowingly induce or procure a breach of trust. This form of liability does not depend on receipt of trust funds. His Honour said (at [166]):

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

Therefore, each of the committee members was found to be liable as an accessory of the parish association to account to the trust for the moneys paid as remuneration to two priests who had been appointed without the Bishop’s consent, Father Dzeparovski (except for the portions statute-barred) and Father Despotovski, while those committee members remained in office.

His Honour had since had second thoughts and dealt with them in this case (at [4]):

However, by the time of the orders judgment, it had occurred to me that my reliance on Mr Eftimov’s [one of the committee members in question] 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’.

Further submissions were put forward on behalf of the committee members, and considered by his Honour in this judgement. To establish accessorial liability it is not necessary that the alleged accessory knows that the principal is contravening a relevant law. It is sufficient that the alleged accessory knows the essential elements of the principal’s conduct which constitute the relevant contravention. Therefore, in this case, it was not necessary that to be liable as an accessory, the defendants must have known that in engaging and remunerating Father Dzeparovski and Father Despotovski the association was committing a breach of trust. It was sufficient that they knew those elements of the transaction that made it transgress ordinary standards of honest behaviour.

After proper consideration, His Honour did not accept the further and more detailed submissions made, saying at [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.

Therefore, the accessorial liability of the committee members was established. His Honour ordered that each of the defendant committee members (other than the third defendant, who was not liable) was 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.

On the issue of costs, after a detailed analysis of the issues, His Honour held that 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 (who were committee members) 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.

The case may be viewed at: http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=162619

Implications of this case

This judgement continues the unfortunate saga of the Church of St Petka and its internal affairs. Although this case disposes of the matters in question for 2012, and it would also appear for good, there is the possibility of a further appeal in 2013.